Support service vessels pull up Coastal Contracts profit


STORIES BY IZWAN IDRIS

SHIPBUILDER Coastal Contracts Bhd's venture into the production of specialised support services vessels for the offshore oil and gas sector has raised its profile in the industry. 

Having established itself as a reliable builder of tugboats and barges since the early 1990s, the move towards manufacturing these higher-end vessels requires a whole new set of technical and engineering expertise, not to mention huge working capital.  

But Coastal Contracts believes that the new type of vessels, called the anchor-handling tug (AHT), will open up a new chapter in its 23-year history.  

“Since we started building AHT vessels, we have had enquiries from not only local and regional contractors, but also from as far as the Netherlands, the US, the Middle East and Australia,’’ its general manager Kelvin Ng told StarBiz. 

The role of AHT vessels is to assist in the handling and positioning of anchors at offshore oil platforms. 

Kelvin Ng

The company also provides towing services to mobile drilling rigs, while upgraded AHT variants known as anchor handling tug/supply (AHTS) boats are used as supply ships to these offshore installations. 

Currently, Coastal Contracts is building five AHTs and has plans to build more similar vessels next year.  

Ng said the company's first AHT boat, a 45-metre vessel of 4,200 brake horse-power (bhp), was sold late last year, while the second smaller vessel was sold last month.  

Both vessels are to be delivered in a month or two, while a third AHT will be due for completion by the end of the year.  

“Work on these vessels started before we enter into the respective sale and purchase agreement with our clients. We start building these vessels without firm orders, as we believe the demand (for AHT) is there and growing,'' Ng said. 

The modern support vessels, which can be built between a year and 18 months, depending on their sizes and capabilities, are priced from US$3.5mil to US$9mil each. 

Ng said Coastal Contracts started constructing the first two vessels last year to capture the upswing in offshore oil and gas exploration and production activities. 

International crude oil prices had risen from around US$25 per barrel in April 2003 to above US$50 per barrel currently. 

The growing number of deepwater oil and gas reserve discoveries in Malaysian waters has also fuelled the demand for more specialised marine support vessels from petroleum companies.  

The new venture into the production of specialised vessels such as AHTs will take the company to a higher level.

“Apart from local contractors, we are also looking at the international market as there is a global shortage of such vessels worldwide,'' Ng said. 

According to reports from a reputable international shipbroker, about half of the world's AHT fleet is due for replacement over the next few years. 

The reports said about 5% of the world's AHT vessels would be scrapped this year, while new vessels would only enlarge existing fleet size by about 2% or even less. 

“We have studied the market and there is currently a shortage of such vessels due to heightened activities in the oil and gas industry, especially in offshore exploration and production,” Ng said. 

Initially, the market had expected the company to charter its AHT to local oil and gas contractors.  

Coastal Contracts has a fleet of more than 40 barges and tugboats, of which some have been chartered to transport goods within the coastal areas of the region. 

“Newer vessels also command higher charter rates. We may probably keep a few vessels in our fleet, but if the prices are right, we will sell them,'' Ng said. 

Currently, a few AHTs are in its shipyard, including its biggest to date, which is a 58-metre AHTS with power output rated at more than 5,500 bhp. 

Ng said bigger vessels would be needed to support oil and gas operations as newer platforms were located further from the mainland. 

“Our long-term plan is to upgrade our shipyard in Sandakan to produce AHTs with power output of up to 12,000 bhp,'' Ng said.  

He said Coastal Contracts planned to build more AHT and AHTS vessels in the future and expected the division to contribute significantly to the group's revenue and profit from the current year onwards.  

 COASTAL :  [Stock Watch]  [News

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